*According to section 2(91) of the Companies Act, 2013, Turnover implies the aggregate value of the realization of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year. Companies falling under this criteria required to annex secretarial audit report with the board report. However companies which are not falling under the above-mentioned criteria may obtain secretarial audit report voluntarily as it will provide an independent assurance of the compliances by the company. The format of secretarial audit report shall be in form MR-3 according to Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Now let’s talk about, who is eligible to conduct secretarial audit in India?

According to section 204(1) of Companies Act 2013, secretarial audit can be conducted by only a member of the Institute of Company Secretaries of India holding certificate of practice (company secretary in practice) and furnish the Secretarial Audit Report in form MR-3 to the company. Company secretary who is employed and not in whole time practice is not eligible to conduct secretarial audit. There is no restriction has been placed by the Institute of Company Secretaries of India regarding the number of audits that can be conducted by Company Secretary in Practice in one financial year. Secretarial Audit is a comprehensive review of all the laws, statutes and legislation applicable on the company. In conducting secretarial audit, company has to comply with a number of rules and regulations based on its area of operations. Company secretary is considered as the statutory watchdog of the corporate world, it has always been the duty of the Company Secretary to make sure that all the laws and rules are being followed by the management. Secretarial Audit helps the Company Secretary to take into account all the non-compliance in a company and to take preventive actions in a company to avoid any kinds of frauds and errors. Secretarial Audit ensures better enforcement of the rules. The main objective of the company secretary profession is to promote corporate governance. With the help of secretarial audit, internal systems of the companies will improve with the overall effectiveness of the legal compliance system.

Signing of Secretarial Audit report

Secretarial Audit Report is signed by the secretarial auditor who is engaged by the company to conduct the secretarial audit of the company and in case of company secretaries firm it will be signed by the partner under whose supervision the secretarial audit was conducted.

Appointment of Secretarial Auditor

In a company secretarial auditor is required to be appointed by means of passing resolution at a duly convened board meeting as per rule 8 of the Companies (Meeting of Board and its powers) Rules, 2014. It is always advisable to secretarial auditor to get the letter of engagement from the company and formally accept the letter of engagement. In case of change in the secretarial auditor it is always advisable to mention the change in secretarial auditor in the board report to the members as a prudent corporate practice.

Applicability of Secretarial Audit in case of Private Limited Companies

Secretarial audit is not applicable in case of private limited companies as according to section 2 (71) of the Companies Act, 2013, public company is defined as which is not a private company and it has been interpreted from the definition that secretarial audit shall be applicable on the private company which is a subsidiary of a public company, and which fall under the prescribed class of companies.

Fraud in case of Non-Compliance

According to section 204(4) of the companies Act, 2013, in case company or any officer of the company or company secretary in practice contravene the provisions related to secretarial audit of the company, every officer of the company or company secretary in practice who is in default shall be punishable with the fine.